My first reaction was, "Well, duh." But, they do put some math around it.
Their calculation goes as follows:
What should the price be? What would it be if we weren’t being gouged by the oil industry? Let’s figure it out. Crude oil at $68 (U.S.) a barrel translates to 50 cents per litre (Cdn) at the pump. Normal refining and marketing margins add 14 cents per litre. Provincial taxes (Ontario) add 14.7 cents. The federal gasoline tax adds 10 cents per litre, for a total of 88.7 cents per litre. Add 6.3 cents for the GST, and that gives us 95 cents — which is what we should be paying.What the policy paper then indicates that it isn't taxes that are keeping the price of gas up.
Agreed, to a point.
The 24.7 cents that are flat taxes from Ontario and Ottawa aren't contributing to the high price (they contribute to a higher price, but an effect that diminishes as the cost of gas goes up).
Now, if you're the oil industry, as the paper suggests, you're bumping up the production of that oil for no reason - the problem then becomes we pay that wonderful 7% GST on top of the gouging. So, entirely claiming that taxes aren't contributing are somewhat false.
Gas in my neighbourhood is $1.15 per litre. That means the federal government collects in GST 7.5 cents a litre; 1.2 more than it "should". If the gas jumps to $1.30/L, the GST collected is 8.5 cents a litre; 2.2 more than it "should".
So, let's call a spade a spade.
- The oil industry is gouging us.
- The government gets increased GST revenue from that gouging. Especially when consumers have no choice but to pay for the gouge-priced product.
- The flat taxes don't actually amount to much in the grand scheme of things.
- Somebody is going to argue for keeping the GST.
- Somebody is going to argue for punishing the gas companies.
- Somebody is going to set up an ineffectual agency to monitor gas gouging, but won't find anything wrong.
Quick relief could come by a reduction in the GST, I suppose, but then if people are used to paying $1.15/litre, the gas companies would still likely charge $1.15/litre. It would come at the cost of reducing the tax revenue, but increasing gas company profits.
The government could come in and force a 2-3 cent reduction in the price of gas. How that would work, I don't know.
I can buy the argument that increased gas prices will discourage unnecessary driving, but it also indiscriminately impacts the tractors, the combines, the pizza delivery guys, the taxi drivers and everybody who needs a car or gas-powered engine to function. Those businesses that should see increased revenue as people leave their cars at home, are going to pass their own gas consumption cost onto those consumers.
I have a feeling that the ominous warning in the report is going to come true.
Of course, no one is going to do anything about this. Just as no one is going to do anything about the fact that the industry is making billions from increases in crude oil prices that have nothing to do with its costs of production. Just as no one is going to do anything about the fact that every time the price goes up, the industry makes another windfall profit from their inventories of gasoline and heating oil.